Careers
I write about the freelance revolution and the future workforce.

Getty

Getty

Upwork recently IPO’ed at a valuation of around $2 billion. It’s by no means the only digital talent marketplace that’s looked longingly at the prospect of an IPO, but it’s the first. According to the Upwork S1 document, the company has almost 400,000 independent professionals offering a range of skills and services, from blockchain and machine learning experts to grant writers for NGOs and everything in between. Fiverr, another large digital talent marketplace, advertises itself as the largest, offering over 120 different areas of expertise, from tech to translators.

Interest in freelancers has never been stronger. Most readers of my blog know that research confirms that over 90% of companies work regularly with freelancers, and executives of three quarters of these companies plan to increase their reliance. It’s not just a lately renewed war for talent that drives utilization: the digital freelance platform democratizes talent, leveling the playing field for talent access. Whether companies are small or large, startups in Bangladesh or GE in Boston, leaders recognize the competitive need to efficiently access the skills they need to perform and grow. Freelance platforms reduce the time to obtain expertise, at lower cost by purchasing only the amount of time and help required, and provide companies with the ability to draw from a large, often global, talent pool.

Although the digital talent marketplace industry is large and growing, it's reasonable to ask how many of the dozens of startups will be around in three to five years. Some will drop out for lack of sufficient traffic and revenue. Consolidation will lead others to merge. Still others will be acquired as “tuck-ins”extending the service offering of traditional staffing companies or consultancies.

However, might an unexpected disruptor of the industry be client companies themselves, who replicate the marketplace inside and effectively create their own freelance talent community? The Big Four accounting and professional firms—Deloitte, PwC, KPMG and Accenture—have already done so, although initially focusing on alumni as have the largest consulting firms. Other leading companies such as Aon and Microsoft are not far behind.

This shift would be supported by established players like MBO Partners and startups like TalonFMS and Kalo, companies that offer freelance management systems which provide the administrative infrastructure for companies to manage their own freelancers. While not as robust currently as the platform technologies of the big marketplaces, they certainly provide a foundation for large organizations to “cut out the middleman” and disintermediate.

Will internal freelance platforms proliferate and succeed? There are several potential benefits to doing so:

The shift to a blended workforce. Given that most companies already depend on freelancers, an internal freelance marketplace would certainly support their efforts to build a strong, effective and efficient blended workforce.

Cultural fit. A recent Toptal survey pointed out the importance, to company executives, of freelancers that work well with their employees, and share cultural values. An internal marketplace would be able to more consistently assess cultural fit and ensure this is the case for their freelancers.

Cost savings. Marketplaces charge for their services and companies that regularly depend on freelancers would avoid the freelance surcharge. For the biggest client companies, the savings would be significant.

Know our company. Companies utilizing freelancers frequently complain that it takes too much time to select the right freelancer and bring him or her on board. They also complain about the lag in contribution as the freelancer is on boarded and begins work. Internal marketplaces would presumably rely on “known” freelancers that work more regularly in their organization, and would reduce these barriers to contribution. In turn, their experience – and it depends on how regularly these freelancers are used – would also likely reduce compliance and IP problems.

Compliance or cost intelligence. A company marketplace might have more ability to monitor and report to company management on usage, expense, duplication of effort across units hiring freelancers to do similar or identical work, and when senior management needs to weigh in on how the organization is using freelancers.

Over time, integrate freelance and employee systems. If forecasts are to be believed, the percentage of individuals choosing the freelance route is continuing to grow. Over time, as the blended workforce evolves, one might expect that distinctions between full-time and freelance employees will increasingly blur. Hence, one talent system, and one talent organization, managing both full-time and freelance resources could provide a good deal of strategic value.

These are compelling benefits that certainly help make the case for internal talent platforms. However, whether they catch fire and expand to more companies, and potentially challenge marketplaces like Upwork depends on how well companies meet the demands made on them. There are several impediments or complexities to work through:

Not our business. Managing a talent marketplace is a business requiring both tech and managerial savvy, significant financial investment, and ongoing attention. In this respect it is no different than the decision for an IBM or ExxonMobil to build its own executive recruiting capability. Not our business is a significant impediment to growing internal marketplaces.

Attracting the right freelancers. Will the company provide enough interesting and regular work for top freelancers to be interested? While the concept of an internal marketplace may be attractive, operationalizing it requires the company to deeply think through its commitment to, and reliance on, freelancers. The ability to attract top freelancers is also an open question. As Alvaro Oliveira, VP of Talent Ops at Toptal pointed out, "Top freelancers will prefer to sign up once and see opportunity instead of joining many different platforms."

Who will manage it. In most companies, HR plays a minor role in sourcing freelancers. Purchasing is the dominant 'go to'. Will purchasing have the skill and interest in managing so large an investment as a talent marketplace given its other responsibilities? Will HR step up and do so, and does it have the credibility and competence? What role would IT play in administering and improving the internal tech platform supporting the marketplace? Determining where the marketplace sits, and what function provides ongoing management, is a challenge.

Investing in its freelancers. Most companies don’t recognize the degree to which the best marketplaces invest in the freelancers they represent. For example, Toptal fields a large full-time population of community managers who have. the responsibility to stay in touch with freelancers, ensure that the platform retains its top freelancers, and supports them with continuing development in both “hard” technical and “soft” interpersonal skill domains. Will companies provide this service? Will they see their freelancers as important stakeholders, or treat them as the “B” team? Like any entrepreneur, freelancers will go where the value to them is greatest, and help managing their business is a key value.

Some marketplaces appear to already recognize the threat and opportunity, and the most innovative are already working to turn lemons into lemonade. One version of the near-future is to create hybrid solutions that connect internal company platforms to a network of external marketplaces and other talent pools based on "best in class" capability. Jonny Dunning, CEO of TalonFMS, explains: “We are seeing co-evolution of the enterprise workforce management space alongside a recruitment managed service provider and BPO offering to deliver a combined tech and people solution.” MBO Partners, for example, played a strong behind the scenes role in creating several internal talent platforms and is helping these companies to network more broadly. It's logical to expect other competitors to enter the fray.